Mid-Morning Look: October 03, 2023

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Mid-Morning Look

Tuesday, October 03, 2023





DJ Industrials




S&P 500








Russell 2000






Broad weakness in U.S. stock markets, reversing early gains after economic data raises more rate hike fears. U.S. stocks are at a crucial point, breaking below last week’s lows of 4,238 for the S&P 500 (SPX), while the 200-day moving average support is lower at 4,200 (it hasn’t traded below the 200-day MA since March). The massive spike in Treasury yields and the U.S. dollar continue to inflict massive damage to sentiment. In the lone data point today, JOLTS Job Openings for August reported at 9.61Mm above the forecast 8.815M and prior month reading of 8.827M. The U.S. dollar and treasury yields made new highs following headlines (Yen weakens to 150 per dollar for first time since Oct. ‘22), which took stocks to the lows intraday. The market/Fed wants to see this number come in lower, or “cooler” as it speaks to the tightness of the labor market and further raises expectations the Fed may need to raise rates again. Factors that are weighing on stock market sentiment include slowing spending fears by the consumer after the resumed student loans this month, higher gas prices, and obviously the impact of higher yields which impact loans, mortgages, etc. and generally raises borrowing costs for companies (see housing stocks falling further). Nearly all eleven S&P sectors in the “red” to start as interest rate sensitive sectors such as Utilities, REITs, Telecom (all big dividend payers), Discretionary among the worst. Despite a three-session decline, oil prices just jumped more than 28% in the third quarter. Europe’s Stoxx 600 extends fall, down 1% to fresh 6-month lows. A lot more jobs data this week with ADP Private payrolls tomorrow, weekly jobless claims Thursday and Nonfarm payrolls on Friday.






WTI Crude















10-Year Note





Sector Movers Today

·     Interest rate sensitive sectors such as utilities, homebuilders, telecom, financials are among the weakest sectors today as yields push higher, making dividend paying sectors less attractive, while the impact on borrowing costs rising, likely to hit consumer and business spending.

·     In Chemicals: NGVT was downgraded from Buy to Hold at Loop Capital and cut tgt to $53 largely because of the surge in energy could underpin another upward move in CTO feedstock costs, representing a sustained headwind for the Pine Chemicals business’ margins; and the ongoing UAW strike could create uncertainty regarding near-term (at least 4Q23) results. Keybanc upgraded shares of LYB, WLK, and DOW to Sector Weight from Underweight saying coming out of the 2Q earnings season, 2H23 earnings expectations were largely reset lower. On the brighter side, valuations are starting to look more attractive and expects 2024 volumes in its coverage to be much less affected by destocking, compared to 2023.

·     In Restaurants: WING was upgraded from Underperform to Hold at Jefferies and tgt to $170 from $150 as it sees diminishing overhang from 2H SSS deceleration with expectations reflecting a more realistic, conservative bar. Jefferies also said in dining preview; for WEN, PZZA, JACK and YUMthey expect modest downside risk on weakened demand, inflation-led cost elevation and tighter credit could expose the QSR group to downside risks. Also said BLMN, FWRG top picks in its preview on Casual Diners ahead of 3Q earnings.



·     ALXO +49%; reports positive interim phase 2 ASPEN-06 clinical trial results of evorpacept for the treatment of advanced HER2-positive gastric cancer; Evorpacept is the first CD47 blocker to show activity in a global randomized study in solid tumors.

·     HPQ +2%; upgraded to Buy from Underperform at Bank America and raised its price tgt to $33 from $25.

·     NFLX +1%; plans to raise prices after the actors’ strike ends, the WSJ reported; said Netflix will likely begin price rise in the U.S. and Canada.

·     ODD +2%; raised its Q3 rev outlook to up 30% at $83M-$90M, above est. $84.3M and prior guide of up 20.5%; raised its Q3 gross margin guidance from 67.5% to 68.5%.

·     PNT +85%; to be acquired by LLY for a purchase price of $12.50 per share in cash in a deal valued at about $1.4 billion payable at closing. The transaction has been approved by the board of directors of both companies https://tinyurl.com/2dm93bsv

·     VERY +95%; agreed to be acquired by iA Financial Corp. (IAG) for $11.4 a share in cash, in deal valued at $170M, roughly a 100% premium https://tinyurl.com/mrwuujhb

·     WMG +2%; upgraded to Buy at UBS and raised tgt to $37 as sees WMG as a LT beneficiary of secular industry trends in music and sees the recent pullback as a buying opportunity.



·     ABNB -4%; downgraded from Overweight to Sector Weight at KeyBanc as view is margins have reached a NT peak and revenue growth could decelerate to 11% y/y in 2024E.

·     BHVN -2%; after 10.227M share Spot Secondary priced at $22.00.

·     BXP -5%; broad weakness in REIT sector (KIM, HST).

·     CCL -6%; seeing weakness in cruise lines (RCL, NCLH as well) as consumer discretionary sector hit hard on spending pullback fears on higher rates.

·     ENVX -11%; after announcing it has initiated a strategic realignment of Fab1 in Fremont which will result in a reduction of the workforce by approximately 185 personnel and expects this restructuring to be completed during Q4 and result in annualized savings of about $22M.

·     MKC -9%; missed Q3 sales estimates ($1.68B vs est. $1.7B) while EPS of $0.65 was in-line as weaker volumes were offset by better pricing; reaffirmed its sales and operating profit outlook and increased its adjusted EPS view to $2.62-$2.67 from prior $2.60-$2.65.


Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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